The Long March - Keystone XL pipeline struggle continues on multiple fronts

Covering the ongoing saga that is the Keystone XL pipeline over the past two years calls to mind the old proverb said to come from India about six blind men examining an elephant. Their perceptions depend on which part of the pachyderm they touch – a pillar, a rope, a tree branch, a hand fan, etc. Each description is correct in a way, but their collective efforts fail to capture the totality of the elephant.

TransCanada’s proposed extension of a pipeline from the oilfields of Alberta, Canada, to Port Arthur and other Texas refineries and ports has been seeking necessary government approvals since 2008. The 1,661-mile pipeline would deliver 700,000 barrels a day of tar-sands crude from Alberta to the Gulf of Mexico by crossing Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.

The State Department plays a central role in the approval process because Keystone would cross an international border, but that is only one of many wrinkles on this particular elephant — the analogy refers to the aforementioned Indian parable, not the symbol of the Republican Party, although Keystone XL remains the subject of intense partisan wrangling by elephants and donkeys alike.

On March 20, the Beaumont City Council got in on the act, unanimously voting to grant TransCanada a permanent easement for the pipeline to cross the Tyrell Park marsh in exchange for a one-time payment of $240,640. This was hardly a surprise since Mayor Becky Ames and councilmembers had long-since declared their support for Keystone XL and Councilman W.L. Pate Jr. appeared at the State Department hearing in Port Arthur last year to urge its approval.

Other recent developments in the story took place in the Texas Supreme Court, a Houston conference center and a small courtroom on the second floor of the old Jefferson County courthouse in downtown Beaumont. Each contributed another piece to the expanding mosaic.

Opposition to Keystone XL from some environmentalists ratcheted up in August 2011 when activist groups staged demonstrations outside the White House, resulting in mass arrests. They stated their protests were not just against the pipeline but fossil fuel itself – a position seen as unlikely to halt approval.

But David Heineman, the Republican governor of Nebraska, succeeded where the protestors had not when he called a special session of the Nebraska legislature last November to block Keystone’s proposed route that crosses the Sandhills region of the Ogallala aquifer, which supplies drinking water to 1.5 million people.

“We’re simply asking why would you put it over the Ogallala aquifer and risk an oil spill or an oil leak,” Heineman said.

Alex Pourbaix, president of energy and oil pipelines at TransCanada, responded to these concerns in an Oct. 18, 2011, letter to Nebraska lawmakers, asserting that moving the route at this stage would be “impossible.”

By November, TransCanada announced it had agreed to reroute the pipeline around the Sandhills region and submitted a new route to the Nebraska Department of Environmental Quality. The Obama administration subsequently said any rerouting of the project would require a new federal environmental study as well.

In early March of this year, Pourbaix told an international energy conference in Houston that TransCanada “will be ready shortly to submit plans for a new route that avoids the environmentally sensitive Nebraska Sandhills region.”

Was this the same Nebraska rerouting TransCanada announced in November? Critics who charged the project was being delayed for political reasons were confused. Wasn’t there a proposal pending before the Nebraska Department of Environmental Quality? Or was Pourbaix’s reference to a formal submission of the rerouting plan announced last November?

Following a Business Journal request for clarification, TransCanada spokesman Terry Cunha said, “Regarding your questions, Alex’s presentation was not a formal submission. Right now there is some legislation being proposed in Nebraska that must be resolved to allow the Nebraska Department of Environmental Quality to continue with their work in re-routing the Keystone XL pipeline. We expect the re-route to be approved by November 2012 and submitted to the Department of State as part of our application for Keystone XL, which we hope to have approved by Q1, 2013.”

Meanwhile, a long-running Texas court case emerged as another potential Keystone stumbling block challenging a pipeline company’s use of eminent domain to seize private land. The Texas Supreme Court upheld the decision in the case of Texas Rice Farmers v. Denbury-Green that unequivocally gives landowners the right to challenge a pipeline company’s common carrier status in court. Basically this refers to a provision in the law that allows eminent domain if the project is for the public good; that is, if the pipeline is a common carrier and transports more than the product of a single company.

Farmer Julia Trigg Crawford is contesting TransCanada efforts to run the Keystone XL pipeline across the 600-acre farm in Lamar County near the Texas-Oklahoma border that her family has owned for generations.

“This fight is about property rights,” said Crawford. “When a foreign company is allowed to take land from Texas landowners for private gain, that’s the problem.”

A more pressing problem for Crawford is the legal roller coaster she is now riding. A temporary restraining order she obtained against TransCanada was vacated by a state district judge in Lamar County only to be reinstated by the 6th Circuit Court of Appeals in Texarkana, keeping TransCanada off the Crawford family land while litigation continues.

Now Crawford finds herself in conflict with the Obama administration which recently approved construction of the southern leg of the Keystone XL pipeline that will run from Cushing, Oklahoma to Port Arthur – crossing Crawford’s farm.

Crawford’s case has attracted media attention in Texas and beyond, but the same issues were being litigated in relative obscurity at County Court at Law No. 1 in Beaumont on March 8.

Veteran trial lawyer Anthony Brocato argued for the plaintiffs, landowners unwilling to accept what TransCanada offered to use their property.

Brocato, who has practiced law here for more than 54 years, said, “If you look at a map of Jefferson County, it’s a spider Web of pipelines but (TransCanada) wants to pay rice-land prices to use their land.”

In court, his argument emphasized the “common carrier” theme upheld in the Denbury-Green decision. “There is no public necessity to Texas; this is strictly a commercial venture.”

Brocato asserted “the purpose of the law is to protect Texas oil producers” and suggested the legislature did not intend for it to protect foreign entities like TransCanada.Judge Tom Rugg smiled broadly, interrupting to ask Brocato, “Have you sold that argument to any court yet?”

“Not so far, your honor,” admitted Brocato, who restated his case in the strongest possible terms.

“They’re moving crude from Canada to Port Arthur to boil it down into diesel and ship it to China,” he thundered, albeit in a polite tone.

TransCanada was represented at the hearing by Thomas Zabel of the Houston law firm Zabel Freeman, whose Web site proclaims, “We know condemnation.”

Zabel responded to Brocato by telling the court some of the crude shipped from Oklahoma to Port Arthur was actually Texas oil sent north before coming back down south.Legal argument on such small points have been known to decide the fates of litigants in cases large and small. It just depends on what part of the elephant fate hands you.

Business Journal editor James Shannon offers a weekly column of business news for readers of The Examiner. For more details, see the editions of the Business journal published monthly in Beaumont, Port Arthur and Greater Orange. Check out the blog at setxbiz.blogspot.com or e-mail james [at] beaumontbusinessjournal [dot] com.

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